Calculator
Factor rate to APR
A factor rate is a multiplier, not an annual rate. Borrow $50,000 at a 1.25 factor and you repay $62,500 no matter how fast you pay it back. That is why it cannot be compared to an APR as written, and why the number looks better than it is.
Convert a factor rate
Enter the factor rate and term a lender quoted you.
- Effective annual rate
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- What "factor minus one" looks like
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- Total you repay
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- Cost of the money
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- Monthly payment
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What this assumes
- Equal monthly payments across the term, which is how most equipment finance amortises.
- Fees quoted separately are not included. Add them to your comparison yourself.
- Results are an estimate for comparison only, not an offer or a quote.
We are not a lender and not a broker. This tool does arithmetic on the numbers you enter. Only a lender can tell you what you actually qualify for. How to read a finance quote
Why the two numbers differ so much
Dividing gives you the wrong answer. A 1.25 factor over twelve months feels like 25 percent, because you repay 25 percent more than you borrowed. But you are repaying the principal throughout the year, so you never have use of the full amount for the full term. The effective annual rate is close to double the naive figure.
The same factor rate over a shorter term is more expensive annually, not cheaper. That is the part most people get backwards, and it is why a factor rate quote hides the term.